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GAZETTE GAZETTE LAW SOCIETY 3.75 July 2011 BLOODGATE: The fallout for disciplinary panel decisions SMDF decision Members vote in favour of 16m financial support for the SMDF Caught in a trap Judgment mortgages are a tortuous experience for many judgment creditors Australian outback Law Council of Australia president encourages Irish lawyers to work remotely BUSINESS TO BUSINESS MAGAZINE OF THE YEAR

Transcript of determination, thinking creatively, spotting new …...determination, thinking creatively, spotting...

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For more information on these or other vacancies, please visit our website or contact Michael Benson bcl solr. in strict confi dence at: Benson & Associates, Suite 113,The Capel Building, St. Mary’s Abbey, Dublin 7.T +353 (0) 1 670 3997 E [email protected]

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New Openings

www.benasso.com

For more information on these or other vacancies, please visit our website or contact Michael Benson bcl solr. in strict confi dence at: Benson & Associates, Suite 113,The Capel Building, St. Mary’s Abbey, Dublin 7.T +353 (0) 1 670 3997 E [email protected]

Remaining the number one Irish legal recruitment consultancy takes a dogged determination, thinking creatively, spotting new opportunities and keeping an open mind

Private PracticeBanking - Associate to Senior Associate: First rate law fi rm seeking a strong Banking lawyer with exposure to SPVs. You will be involved in a range of transactions acting on behalf of both domestic and international clients.

Commercial Litigation – Associate: Central Dublin practice is looking for a strong practitioner with an excellent litigation background.

Commercial Litigation - Associate to Senior Associate: Strong practice with a client base ranging from SMEs to international companies requires litigators with commercial litigation expertise.

Commercial - Senior Associate: A signifi cant Dublin practice is searching for excellent candidates with commercial nous coupled with the enthusiasm and drive to develop a fi rst rate client base.

Corporate Finance – Assistant to Senior Associate: Leading Dublin practice requires a high calibre lawyer to deal with corporate advisory work including mergers and acquisitions, joint ventures, management buy outs, reverse takeovers and debt and equity fi nancings as well as advising on fl otations and fundraisings.

EU/Competition - Assistant: Our client is a fi rst class legal practice whose client base includes prestigious public service and private sector organizations operating both in the domestic market and internationally. You will be a Solicitor or Barrister with excellent exposure to EU and Competition Law, gained either in private practice or in-house.

Funds - Assistant/Associate: Top ranking law fi rm requires excellent Funds specialists at all levels. You will advise investment managers, custodians, administrators and other service providers of investment funds on establishing operations in Ireland.

Funds - Assistant to Senior Associate : International law fi rm recently established in Dublin is searching for ambitious commercially-minded practitioners with strong exposure to investment funds.

In HouseSenior Legal Advisor: Our client is searching for a senior solicitor or barrister with expertise in equity capital markets, corporate fi nance, mergers and acquisitions or general corporate practice advising Irish or UK listed companies.

Telecoms - Junior Solicitor or Barrister: Our client is searching for a junior solicitor or barrister to work with a growing team. You will be dealing with a variety of Telecoms related matters. This is a new role which requires strong people skills and business acumen. Fluency in Spanish is an essential pre-requisite.

PartnershipOur clients include the leading Irish law fi rms. Signifi cant opportunities exist in the following practice areas and a client following is not essential.Employment ; Funds ; Insolvency ; Litigation ; Regulatory/Compliance ; Environmental & Planning

LAW SOCIETY GAZETTE • Vol 105 N

o 6 JU

LY 2011 Law

Society of Ireland

GAZETTEGAZETTElAW

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€3.75 July 2011

BLOODGATE:The fallout for disciplinary

panel decisions

SMDF decisionMembers vote in favour of €16m financial support for the SMDF

Caught in a trapJudgment mortgages are a tortuous experience formany judgment creditors

Australian outbackLaw Council of Australia president encourages Irish lawyers to work remotely

BUSINES

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MAGAZIN

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Law Society Gazette www.gazette.ie July 201134 judGment mortGaGeS

Flor McCarthy is managing partner of McCarthy & Co, Solicitors, Clonakilty. He has over ten years of commercial litigation experience. He acted for the second defendant in Irwin v Deasy (email: [email protected]. Twitter: @flormccarthy)

TRAP?CAUgHT In A

“This case is testimony that sufficient wisdom has not yet accumulated to obviate another judgment creditor being impaled on the chevaux de frise of the regulation of judgment mortgages” (Laffoy J in Irwin v Deasy).

The position of creditors holding judgment mortgages over co-owned land has been fraught with uncertainty since January 2006. The Supreme Court decision in Irwin v Deasy, delivered on 13 May 2011, finally provides certainty for all involved.

But, in an era in which the laws governing all aspects of debt in our society are under urgent review, should we be persisting with the judgment mortgage model?

Suspicious mindsThe plaintiff in the case was the Collector general of the Revenue Commissioners. The plaintiff was owed money in respect of taxes by the first defendant. The first defendant was joint owner with his spouse of freehold land registered in the Land Registry (now the Property Registration Authority). The plaintiff had secured judgments in 2000 and 2002 in respect of the monies owed, which it had registered in the Land Registry as judgment mortgages against the first defendant’s interest in the land. The plaintiff initially issued proceedings against the first defendant only, seeking an order that the judgments were well charged on the lands, together with an order for sale in lieu of partition of those lands.

The matter first came before the High Court on 1 March 2004, when Ms Justice Finlay geoghegan joined the first defendant’s spouse to the proceedings and, in doing so, held that, where there were two co-owners of a property that was the subject of an application for an order for sale in lieu

of partition, the other owner should, unless unavailable, be joined so as to ensure that the constitutional principles of fair procedures are observed and that the individual circumstances of all the interested parties could be taken into account by the court.

The substantive matter then came before Ms Justice Laffoy on 31 January 2006. The issue identified by counsel for the second defendant in the proceedings was that, in cases involving registered land, a judgment creditor did not have sufficient locus standi to seek an order for partition or, by extension, an order for sale in lieu of partition in order to satisfy the judgment debt, and that the court had no jurisdiction to make such an order in cases of co-owned registered land.

The distinction between registered and unregistered land arose from the manner in which a judgment mortgage operates in each title system. In the case of unregistered land, the judgment mortgage operates in the same way as a mortgage created by deed: the relevant legal estate that has been mortgaged vests in the mortgagee (in this case, the judgment creditor), which provides that creditor with sufficient interest in the land to seek partition. However, in the case of registered land under the Registration of Title Act 1964, the registration of a judgment mortgage did not give the creditor any interest in the land, and the judgment creditor’s rights were limited to those contained in section 71(4) of that act.

The court held that it did not have any jurisdiction to order a sale in lieu of partition other than by the statutory jurisdiction conferred on it by the Partition Act 1868 and that a judgment mortgagee in cases of registered land did not have sufficient interest in the land to seek the benefit of that act. The court held that it did not have any inherent

thetortuousexperienceofjudgmentcreditorsincasessuchas Irwin v Deasy confirmsthatourdebtcollectionsystemneedstobelookedatfromscratch.florMccarthystepsonourbluesuedeshoes

35Law Society Gazette www.gazette.ie July 2011 judGment mortGaGeS

>>> Irwin v Deasy providescertaintyonthepositioninrelationtojudgmentmortgagesregisteredpriorto1December2009

> Itcreatestwoclearclassesofinstrument:thoseregisteredinthelandRegistryandthoseregisteredintheRegistryofDeeds

> Itisreasonabletoassumethattherearealargenumberofothercreditorsouttherewithjudgmentmortgagesregisteredpriorto1December2009withaveryrealinterestintheimplicationsoftheoutcomeofthisdecision

> thereisaneedforroot-and-branchreformofthemeansbywhichlegitimatecreditorscangetpaidwhattheyareowedinatimelymanner

FaSt FactS

37Law Society Gazette www.gazette.ie July 2011 judGment mortGaGeS

jurisdiction to grant a sale in lieu of partition and that the Registration of Title Act 1964 itself did not provide any such specific remedy to a judgment creditor.

The underlying debt that was the subject of the proceedings was settled following the outcome in the High Court. However, the legal point was a matter of some considerable importance to the plaintiff and had implications for a large number of similar cases. Therefore, the plaintiff wished to appeal the decision to the Supreme Court. The first point that fell to be considered by the Supreme Court was whether such an appeal could proceed where the underlying matters in contention had been resolved. It was submitted on behalf of the plaintiff that the point of law in this instance was not one limited to past events particular to this matter and was a matter of such public importance as to warrant determination in this case. The Supreme Court allowed the appeal to proceed on the basis that the legal representatives for the second defendant would act as legitimate contradictor in the matter.

A little less conversationThe matter was heard before a division of the Supreme Court comprising Macken J, Finnegan J and O’Donnell J on 29 July 2010. Finnegan J delivered judgment in the matter on 13 May 2011.

The Supreme Court found that Laffoy J had been correct in the High Court in holding that she did not have jurisdiction under sections 3 and 4 of the Partition Act 1868 to make an order for sale in lieu of partition in respect of registered land on the application of a judgment mortgagee. The Supreme Court held that, in cases of registered land, the relief available to a judgment mortgagee was limited to that contained in section 71(4) of the Registration of Title Act 1964, which did not go so far as to give the court power to treat a judgment mortgagee of registered land as having the rights of a judgment mortgagee of unregistered land. It found that the 1964 act clearly distinguishes between a charge created by a registered owner, which has the effect of a mortgage, and a judgment mortgage, which does not have that effect.

The Supreme Court found that the reason for not assimilating the position of a judgment mortgagee in unregistered land in cases involving registered land made sense when viewed in the context of the intention of the legislators in enacting the Registration of Title Act 1964 – that is, the policy of ultimate compulsory registration of all land in the State, which, by coincidence, was finally extended to all counties and cities in the State on 1 June 2011.

The Land and Conveyancing Law Reform Act 2009 came into force on 1 December 2009 and largely cured this problem.

Section 117(1) of the 2009 act states that registration of a judgment mortgage operates to

charge the judgment debtor’s estate or interest in the land with the judgment debt and entitles the judgment mortgagee to apply to the court for an order under section 117 or section 31 of that act.

Section 31(1) of the 2009 act states that any person having an estate or interest in land that is co-owned may apply to the court for an order under that section, including an order under section 31(2)(c), for sale of the land and distribution of the proceeds of sale as the court directs. Section 31(4)(a) states that a person having an estate or interest in land includes a judgment mortgagee.

All shook upThe case therefore provides certainty on the position in relation to judgment mortgages registered prior to 1 December 2009 and creates two clear classes of instrument: those registered in the Land Registry (Property Registration Authority) and those registered in the Registry of Deeds. The holders of judgment mortgages registered on land with Registry of Deeds title have rights as mortgagees and have sufficient interest in co-owned land to seek a sale in lieu of partition. The holders of judgment mortgages registered on land with Land Registry title have a charge on the land only and do not have sufficient interest to seek either partition of co-owned land or a sale in lieu of partition.

The clarity on the position for judgment mortgages registered prior to 1 December 2009 is more than of mere academic interest at this stage. It was stated to the court in this case that there were a large number of known cases involving similar circumstances that were directly depending on a determination on this point. It is reasonable to assume that there are a large number of other creditors out there with judgment mortgages registered prior to 1 December 2009 with a very real interest in the implications of the outcome of this decision.

But are judgment mortgages the right way of ensuring that creditors get paid?

The Land and Conveyancing Law Reform Act 2009 has cured the anomaly in relation

to co-owned land that was first given judicial recognition in this case. However, it preserves the system of judgment mortgages, albeit in a much improved and simplified form.

Heartbreak hotelThe experience of creditors holding judgment mortgages over registered land registered prior

to 1 December 2009 is reflective of a general malaise experienced by many of those forced to engage with the Irish legal system in an effort to get paid what is legitimately due and owing to them. All too often, creditors experience a costly and ineffective system fraught with delay, which undermines the credibility of the legal process as a meaningful means of recovery.

Debt reform is a very topical and necessary subject in our society today. But hand-in-hand with reform of the way in which those in debt are treated by the law, there is a need for root-and-branch reform of the means by which legitimate creditors can get paid what they are owed in a timely manner.

In her High Court judgment, Laffoy J quoted glover, writing 73 years previously on the judgment mortgage in the context of registered land: “Over 50 years ago, a Royal Commission, composed for the most part of leading real property lawyers of the day, described a judgment mortgage as a ‘trap rather than a security’. It recommended that the system of registering judgments as mortgages should be discontinued, that a judgment creditor should be at liberty to enforce his judgment by proceeding summarily … for the sale of the lands of his debtor … It is proposed that this simple and effective procedure to get rid of the chevaux de frise of tedious, trivial and expensive formalities that the Judgment Mortgage (Ir) Act 1850 raises between a judgment creditor and his debt.”

The tortuous experience of judgment creditors in cases such as this confirms that our debt collection system needs to be looked at from scratch, as has been advocated for over 128 years. G

cases:• Irwin v Deasy [2006] 2 ILRM 226;

[2004] 4 IR 1; [2006] IEHC 25; [2011] IESC 15

legislation: • Land and Conveyancing Law Reform Act

2009• Registration of Title Act 1964• Partition Act 1868

Look it up

“The case provides certainty on the position in relation to judgment mortgages registered prior to 1 December 2009”

Now that’s a chevaux de frise...